Q3 2023 Ero Copper Corp Earnings Call
It goes to the ERO copper third quarter, 2023 financial and operating results conference call.
As a reminder, all participants are in listen only mode.
The conference is being recorded.
After the presentation, there will be an opportunity to ask questions. During the question queue. You May Press Star then one on your telephone keypad.
Do you need assistance during the conference call It machine learning, operator, but especially starting from zero.
I would now like to turn the conference over to Kurt Nielsen Senior Vice President corporate development and Investor Relations for opening remarks. Please go ahead.
Thank you operator.
And welcome to Arrow Coppers third quarter 2023 earnings call.
Our operating and financial results were released yesterday afternoon and are available on our website as are our financial statements and the MD&A for the three and nine months ended September 32023.
On the call with me today.
Our David Strang, <unk> co founder and Chief Executive Officer, Michael Defilippo, President and Chief operating Officer.
And Wayne drier Chief Financial Officer.
We will be making forward looking statements that involve risks and uncertainties from which actual results may differ materially.
We would refer you to our most recent annual information form available on our website SEDAR and Edgar for a discussion of the risk factors of our business and their potential impact on future performance.
As a reminder, unless otherwise noted all amounts are in U S dollars I will now pass the call over to David Strang.
Thank you Courtney and thank you everyone for joining us today.
We're speaking to you today from our offices in Sao Paulo, Brazil at the end of the week long through with our board during which we visited each of our operations.
Happy to share that everyone is boyd from the visit.
Especially seen the great progress our team has in Brazil has made in each of our major growth initiatives.
Our third quarter financial results reflect our team's exceptional strategic execution and operating performance amid challenging market conditions.
Despite the macro economic headwinds that led to weaker metal prices and a stronger Brazilian reais against the U S. Dollar we remained focused on executing and broadening our growth strategy positioning arrow for long term value creation is a global issue.
Energy transition gains momentum.
During the quarter.
Our near term growth projects achieved several critical milestones. So it took them a project as announced last month reached over 70% of physical completion.
Furthermore, a significant achievement was realized at the <unk> operations, where we successfully initiated production from them a 10 year thing.
<unk> and record gold production and operating margins.
Meanwhile, at our Colorado operations, we continue to advance up the last three O initiative as we near completion of the mill expansion project and prepared to commence means thinking that's a new external shift.
In parallel we continue to bolster our medium and longer term growth pipeline through ongoing regional copper and nickel exploration programs at the <unk> operations.
As well as through the execution of a binding term sheet to earn a 60% interest in value based metal furnace copper project.
Which we announced earlier this week.
Before I hand over the call tobacco to provide more detail on the execution of our growth projects I will summarize our third quarter operating and financial performance.
At the Caribe operations copper production was in line with our forecast at 10766 tonnes of copper in concentrate.
I'll see what cash cost for the quarter were also in line with our forecast in BRL terms when converted to U S dollars and the average third quarter exchange rate of 488 P. O L. A U S dollar.
Compass see one cash costs in U S. Dollar terms remained elevated at $2 82 per pound of copper produced.
Copper production is expected to be strongest in the fourth quarter due to higher anticipated mined and processed copper grades as a result, we are reaffirming our 2023 copper production guidance of 44 to 47000 tons.
Due to higher expected copper grades and with the current quarter to date exchange rate averaging over five.
5.05, BRL per U S. Dollar, we also expect to deliver lowest she wants to cash costs in the fourth quarter.
For the full year, our corpus see one cash cost guidance range based on the original.
Assumed foreign exchange rates, a 530 BRL per U S dollar remains $1 40.
<unk> dollars.
Dollars 60 per pound of copper produced.
Yet.
Given the continued strength of the BRL against the U S. Dollar. We're also providing a sensitivity range of $1 50 to $1 70 per pound of copper produced should a BRL to U S. Dollar exchange rate remain at current levels for the remainder of the year.
And I was 17 operations as I mentioned earlier, we successfully initiated production from the <unk> vein during the quarter, which contributed to a quarter on quarter increase of over 40% in both process gold grades and gold production.
As a result, we produced a record 17579 ounces of gold and see one cash cost of $371 per ounce.
Due to our strong year to date operating performance at the <unk> operations, we are increasing our 2023 gold production guidance range from 50 to 53000 ounces to 55 to 59000 ounces.
We're also reducing our full year C. One cash cost guidance from 475 to $575 to 375 to $475 per ounce of gold produced.
And lowering our all in sustaining cash cost guidance range from 1000 to $1100 two.
900 to $1000 per ounce of gold produced.
Our financial results for the period reflect the combination of our strong continued operating performance as well as the metal price weakness and BRL strengths that I mentioned earlier.
As a result, adjusted EBITDA for the third quarter was $42 9 million and adjusted net income attributable to the owners of the company was $17 3 million.
18th.
For sure.
Diluted basis.
As planned our capital expenditures remained elevated at just over 120 million during the third quarter largely due to the strong progress being made adults who come a project.
In an effort to maintain the momentum we have carried forward from the second and third quarters, we have elected to accelerate select work streams. Originally slated for the first quarter of 2024 to the fourth quarter of this year.
As a result, we have adjusted 2023 capital expenditure guidance for the took them. A project to include estimated increase of approximately $15 million to $20 million due to the expected shift in timing of associates of payments.
We have also provided foreign exchange rate sensitivities across our capital expenditure guidance ranges to reflect the potential impact of the BRL to US dollar exchange rate remain at current levels through the end of the year.
I will now pass the call to macro to discuss the highlights around our third quarter project execution, after which Wayne will discuss our financial results for the quarter.
Thank you, Dave and good morning, everyone with.
With respect to progress on our strategic initiatives I'm incredibly proud of our operational teams were able to continue execution through the third quarter. After an excellent first half of the year.
Before discussing each of our projects in detail I would like to congratulate all of our employees and contractors at the two come up project currently totaling over 1700 people on site on achieving over 2 million hours without a lost time injury.
In terms of progress at two combined we achieved a major construction milestones of over 70% of physical completion as you would've seen in our project update from October.
Noteworthy achievements onsite include the completion of earthworks completion of all major civil concrete pours major advancements and steel fabrication and erection as well as installation of several key pieces of process equipment, including our primary crusher ball mill and tertiary crushers.
Evidenced in our updated site photos, we were making excellent progress and flotation cell installation and sitewide quite work and piping.
In parallel.
Our main substation and power line installation.
Are both tracking ahead of schedule and we expect it to tie into the national grid at the end of this month as a result mechanical completion testing in our first commissioning phases of installed equipment are expected to commence prior to year end.
With the progress made on procurement manufacturing equipment deliveries and construction today, our primary focus on the project has transitioned to piping cabling instrumentation installations as well as our operational readiness planning all of which is progressing on schedule.
As David mentioned.
The excellent performance and momentum we have been able to achieve this year.
In particular on the pre stripping and electrical power installation fronts, we expect to accelerate select work streams related to both mining and plant commissioning from the first quarter of 2024 to the fourth quarter of this year, which has been reflected in our updated guidance.
While our expected project delivery date remains unchanged. We believe the acceleration of these work streams will continue to derisk, our overall commissioning and ramp up schedule.
Our total direct project capital estimate for the completion of the two come off project remains unchanged at approximately approximately $305 million.
It is worth noting that our Q2 redesign of our haulage route combined with decreased emotion costs below budget earthworks tailings and waste dump construction costs.
And a reduction in duties on imported equipment versus our budget have largely offset the impact of a stronger than anticipated foreign exchange rate and increases in forecast electro mechanical erection costs through project completion.
At our Colorado operations, we continue to advance the new external shocks of the poll, our mine and the expansion of our car Eva mill, both part of our pillar 3.0 initiative.
During the third quarter, we finalized the installation of the headframe for the new external shaft <unk>.
<unk> installations and are currently commissioning both the stage and personnel winders.
We remain fully on track to commence main thinking activities prior to year end.
With respect to supporting infrastructure underground at the pull our mind, we are in the final commissioning stages on our underground box plant.
Reading, the waste and ore silos for our ore flow system and are preparing for the second phase excavation of our crusher chamber.
I'm pleased to report that all of our underground development requirements remain on schedule for shaft handover to operations in Q4 of 2026.
Back on surface at the car even bill.
Installation of our new ball mill Jameson cell and associated electrical installations, where nearly completed during the third quarter.
We anticipate an on schedule physical completion of the expansion project prior to year end.
Last but certainly not certainly not least at Jive and Ciena, we successfully developed into and commenced mining of the maturing of vein during the quarter.
Fundamental component of our Nx 60 initiatives.
During the quarter, we mined ore from three different production levels within them achieving a record production results this quarter and revised full year guidance ranges for the Java Ciena operations speak to the positive impact from this initiative.
As Dave noted, we are expecting a strong fourth quarter at each of our operations and continued execution across our project portfolio.
I will now turn the call over to Wayne to discuss our financial results.
Thank you Micah.
As Dave mentioned earlier, our third quarter financial performance reflected record gold production and operating margin, which partially offset a decrease in copper production as well as continued copper price weakness and a stronger Bureau, which averaged 488 against the U S dollar for the period.
This drove operating cash flows of $41 $9 million that helped to fund capital expenditures of $121 $4 million, which were primarily directed towards the ongoing execution of our organic growth initiatives.
We ended the quarter with a strong liquidity position of approximately $238 million. This includes cash and cash equivalents of $45 million short term investments of $43 million and $150 million undrawn availability under our senior secured revolving credit facility.
Regarding up BRL to U S. Dollar exchange rate hedge program, we reported realized gains of $3 5 million for the quarter.
Consistent with our conservative strategy and in response to a favorable move in exchange rates towards the end of the quarter that extended into October we opportunistically expanded our foreign exchange rate hedge program to cover the majority of projected operating costs and capital expenditures through the end of 2024.
These hedges have a weighted average floor and ceiling of 504 and $5 43 Bureau of U S. Dollar.
And includes approximately 145 million designated for major project capital expenditures with a weighted average floor and ceiling of 510, and $5 23 Bureau, who U S dollar respectively.
It's also worth noting that we remain hedged at approximately 75% of our copper production for the remainder of the yet through the zero cost collar hedge program, we initiated in January.
These copper hedge contracts provide a floor price of $3 50 per pound on 3000 tons of copper per month through the end of December 2023.
With that I'll now hand, the call back to David to share some final remarks.
Thank you Wayne and thanks, again to everybody who's been on the call.
I think the Siem for the quarter has been operating extremely well as a team both operationally and on the capital projects and a dynamic macro environment dealing with exchange rate and metal price volatility on the copper side of things.
Cannot thank our team enough both in Vancouver, and even Brazil foods. The strong efforts. They have done in terms of continuing to move our projects forward and continuing to operate our operations and while we don't want to single out any particular operation versus others. The exceptional performance of our team.
At the <unk> operations.
And with that operator, I'll turn it over to you for question period.
Thank you.
We will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad evil here at Cowen acknowledging your request.
If youre using a speakerphone please pick up your handset before pressing any keach David draw. Your question. Please press Star then.
We'll pause for a moment as colleagues joined the queue.
Your first question comes from Dalton Barreto of Canaccord.
Please go ahead.
Good morning, guys, Dave I actually wanted to kick off by talking about this.
This new furnace project, but you didn't actually mentioned on the call and I'm wondering can you talk a little bit about the project itself. The rationale for the deal maybe why Vale didn't run with it and how this thing will compete for dollars versus your existing portfolio.
Thanks, Dalton I think we did mention at the beginning of the call.
But with respect to fairness I think there's a couple of things we like to be able to point out number one we've always.
Said, then we always want to continue to grow our business here in Brazil, and when we look on a longer term basis of the future of this company.
When the opportunity came to us with respect to fairness and volleys approach to us if we would be interested in looking at it it was something that for us is extremely dynamic and.
I'm being somewhat hesitant because with respect to the rules under 43, 101, and what we can and cannot say with respect to the project, but what I can say with regards to it is as you know Mike and the team.
From the geology side of things.
Have a great understanding with regards to a lot of projects here in Brazil.
The work that Vale has put into this project drilling over 90000 meters and over 240 drill holes.
The opex.
Opportunity to be able to work with Vale and this is a bigger relationship that started to be established.
The context between ourselves and Vale with based upon valleys viewpoint of a partnership that could look at something that they've looked at historically from let's say an open pit perspective an hour.
Opportunities in terms of how we operate underground in Brazil.
Our strong focus on ESG was something that gave Vale comfort that this is where we are a company.
They feel comfortable that they went into a relationship like this.
That's the generalities I can say right now as we continue to move forward as we continue to work on the project. So I think it will become a lot more self evident to the world with respect to the opportunity that's available to us with respect to furnace furnace is a long term.
Growth opportunity for Euro Cup hurt.
We will be working on it as you said ideally we'd like to be able to accelerate it faster than the program that we have but it will be working on that project for the next five years.
Within that the competition for exploration dollars does not exist between what we're doing in the <unk> valley in a nickel projects, there and what is happening around fairness.
We have and are extremely comfortable with the budgets that Mike and the team have put together with regards to the work we need to do it for an S and remember.
With over 240 holes already drilled on the project the work that Mike and the team. There are doing is a lot of compliance related work with regards to 43, 101, and bringing that project into the ability to discuss the resource with the marketplace and the 43 101.
So it is a great great growth initiative for this company.
Yep.
We will be talking a lot more about it over the course of the next 12 months to 18 months and I think in the in the <unk>.
Fruit of time, I think the market will come to understand the great opportunity. We have here and also the great relationship that we started to develop with one of the biggest mining companies in the world.
And working with them and I think that should be taken into consideration as well with regards to this.
Brazil and Vale.
Being synonymous and the opportunity to work with the biggest mining company here in Brazil is a great opportunity for ERO copper in the future.
Great. Thanks for that Dave and then maybe switching gears to <unk> to come on so you're still guiding to a fresh production in <unk> 'twenty 'twenty four but the mine is almost dead itself, but you're gonna kick up plant commissioning by year end.
Is there any upside to your guidance and what are some of the key risk between now and then.
Yeah.
And this is market great question Dalton, Yeah look I think we're we're obviously things are going really well.
We've continued to build on the momentum from the first half of the year, obviously seen a big jump.
In physical completion relative to last quarter.
I think you know in terms of starting the first commissioning phases and having a power of site early obviously, he's going to help us derisk, our commissioning and ramp up schedule with respect to project completion.
You know, we're working it as hard and fast as possible to get ahead I think the the risk is always the same and that's the rainy season and how much progress we can make we've planned for that in our current startup schedule and.
That's part of the reason that we're we're moving capital from Q1 next year into Q4, and also continue to maintain our or our current plan, which is the second half of next year. So while there's some opportunity there I think you know given the uncertainties.
Uncertainties involved we're going to stick to our second half guidance for now yeah, adult and just to reaffirm that.
We're taking a conservative approach with regards to what we're doing.
Yes. The project is moving forward very very well.
But we are not in a position nor do we feel comfortable right now to change any guidance with regards to when commissioning.
Commercial.
<unk> comes comes comes into play maybe we have a conversation with the marketplace.
In the first half of next year with regards to that but we're not changing guidance right now.
Thanks, guys I'll jump back in queue.
The next question comes from arrest Guido of Scotia Bank.
Please go ahead.
Hi, good morning backwards. It did I hear you say earlier that the.
The impact of the FX have been largely offset by savings elsewhere on the Kumar and that's why the total project Capex of 305 million is unchanged.
Yeah, that's exactly right or so.
Obviously, there wasn't impart stronger this quarter or in Q3.
Relative to right. If you look at the the the big offsets there are.
It's going to be on the redesign of the mine haulage route. So both in terms of a pre strip and also when we're starting to get into building our run of mine stockpiles.
Q2 redesign was able to shorten that haul route fairly significantly.
Assessing savings on on emotion costs.
And then primarily in some of the as well as the import duties on some of the equipment. That's arriving on site. That's all flowing through our our forecast obviously as we look ahead.
We're seeing a.
A couple of things moving in the opposite direction, including increased electro mechanical erection costs for completion.
You know as we continue to build this project out both in Q4 and through the first half of next year two to project handover. You know, we're going to continue to see a positive adjustments of negative adjustments. Fortunately to date those have largely offset each other and we're continuing to anticipate a cost of completion.
$305 million, but again those are that's our best estimate things are going up and down on a regular basis.
Okay, just as a follow up I mean, given there's a lot of moving parts here you bring forward. Some capex you got some currency changes and now you're also introducing some spending for forgot what does capex look like for 2024 audit we think companywide.
Yeah look.
Well as I think all companies are from from discussions I've had with my counterparts at various companies were all in the process of budget season right. Now so I think it would be premature to talk about company wide capital in advance of our of our budget with respect to tick them. All I can say is that we're anticipating the cost of completion of that project to be.
At the time of a handover to be $305 million subject to the variations, we talked about but in terms of a company wide capex, we're in that process right now.
Okay. Thank you.
Next question comes from Stefan <unk> of Carmike screens.
Go ahead.
Okay. Thanks, very much guys. Just just wondering is there can you provide any more color just on on the exploration at Kuwait by whether copper ore nickel even.
Yes Stefan.
Program remains ongoing.
We would have liked to.
And I had spoken in previous quarters of having a more fruitful discussion with the marketplace with respect to our advancement of the nickel opportunities. Unfortunately the.
A N M, which is the government organization that manages the.
Management of mineral licenses and exploration licenses in Brazil went on strike in the middle part of the year and that strike now and it has had an effect with respect to our ability to both close some transactions that we've been working on as well as some auctions the governor.
What's going to run.
That has resulted in us having to delay the discussion with the marketplace with regards to what we.
Starting to uncover with respect to the nickel exploration, however, Mike and the team are continuing to explore on the areas that we have been able to explore we have expanded the exploration program into two to three other areas.
And the fact that Mike and the team is still got drill rigs turning as the best I can tell you with regards to the success rates that we're having that right now, but it's our hope that sometime.
We got to be Super careful about giving a timeline with regards to when we can talk more frequently about our nickel program.
Love it to be the first quarter of next year I doubt it will be.
It would be somewhere in the second quarter that we can have a more fruitful discussion. However, as exploration program continues and we have anything material that we feel we'd like to discuss with the market unmet clinical results. We will do so in a timely manner.
Okay, Great. That's very helpful. So I guess, you know timing aside obviously lots going on so just stay tuned then.
Yeah, I mean like like everything else, you know wed love to put out quarterly.
Exploration results I mean, we are having success and some programs that we're doing both in the pillar mine itself again, we've had success in some work that we've been doing it for males in terms of some exploration there and some extension work there.
We have done some work on some copper.
In the Vms district, some very deliberately interesting.
Results there.
Our exploration program at 17 has gone incredibly well.
And the team.
Done a lot of great work, there, particularly around extensions to the centre Antonio vein system. So lots of good work that the team are doing in a number of different areas within that exploration program.
And we hope to be able to continue as I said to be able to talk more fruitfully about things in the new year.
Okay, Great. That's very helpful. And then just one whether it's there's one other question just with shifting back to sort of to come out of area and then I guess fairness I'm. There was you know previously they were sort of high level sort of talking of thinking about to come out and sort of in the greater context about hub and spoke model furnaces kind of in the same area, but maybe.
Bit too far away to be hub and spoke if I read between the lines is there still other opportunities that you're seeing there as well to feed into that strategy over time or is it spread as kind of the next step for call. It the carriage as an arrow copper.
Well no I think I think whether it's fitness was in in the us of where the finesse with somewhere else in Brazil.
Finesse in and of itself is a great opportunity for our company.
With regards to took them on a it is a foundational asset in the western carriers.
And as such we and Mike and the team are broadening their work.
On regional exploration in and around took.
Took them on and the area there.
There are some opportunities potentially that other people have looked at we are evaluating these they were a little bit earlier stage.
But we certainly feel we're starting to get our feet wet in terms of the foundation that we have built in the western carriers and the opportunities to potentially grow our business. There I think it's very much stay tuned up.
Right now with what's happening in the western carriers.
Okay, great great well, thanks very much appreciate it.
The next question comes from Craig Hutchison of TD Securities. Please go ahead.
Hey, good morning, guys.
Just with regards to accumulate $305 million can you just provide some clarity in terms of how much that $305 million left to spend just to kind of a cash component.
Yeah, Yeah sure Craig So right now this is Marc again, so right now you know physical completion was at the end of September physical completion.
Breached you know, 70% as you know our physical spend is tracking just behind that so we're about 60% complete on direct project expenditures through the end of September.
Okay great.
And then just in terms of liquidity I recognize you guys have a fairly strong position now, but it's the copper prices sort of languish here for the next few quarters.
Are you are you concerned at all about your liquidity position and any kind of thoughts in terms of bolstering not through Upsized your credit facility or some other non dilutive needs through now and get through mid next year. When the project is complete.
Yeah. Thanks, Thanks for that Craig.
Like any company that has got major capital programs, we are constantly working with respect to scenario analysis.
On various metal prices with regards to as we have seen exchange rates and anything we can do with regards to mitigating that.
Uh huh.
At current metal price levels, we're generally pretty comfortable but you can't run a company on that basis.
You have to look at risk.
And manage risk around that in various scenarios and then doing our scenario planning with respect to that.
We're in the process of doing that we do constantly and were looking at all the levers that we have with regards to making sure that the company is protected in such a way that we can deliver to come on.
On time and be able to bring that great operation into production.
So all I can tell you with regards to that is we continually and constantly looking at scenario analysis with regards to that.
I will tell you we will not risk this company with regards to anything and if we feel it's prudent to pull other levers we will do so.
This time, we're still in the works with regards to evaluating various scenarios that we have.
Alright, perfect. Thanks, guys.
The next question comes from Alex <unk> of Stifel.
Go ahead.
Hey, good morning, guys.
A couple of questions for me.
First the 17 mine grades in the quarter really impressive the matina vein.
Good contributor to that with a higher than expected and if so any potential read through to 2024.
So yeah, we got into mid teen year early and we did find some areas grade was significantly higher than what we anticipated and that has been a positive benefit.
With respect to that it's too early to say right now where we will continue to go with regards to mid teen year. There's some really interesting things that we're seeing but I don't think any of any of us are going to change guidance with respect to what we thinking with regards to mid teen year right now it's a great start.
Pretty excited up teams excited about what we've encountered.
It has had a positive correlation we continued to see higher grades than we anticipate anticipated.
But we're not going to change anything with regards to guidance nor thinking on it right now with respect to <unk>.
Okay. Good.
Good start anyways second question at furnace, you said greater than 240 holes drilled so far.
That's a lot of halt.
Can I read into that then I mean do you think you have enough information available already to put a 43 101 compliant resource together.
And is that something we could expect over the next few months.
We are.
So, let's let's talk about our work in fairness.
We have signed a.
Binding letter of intent, we now move into negotiating a definitive agreement.
Both ourselves and Bali in terms of the team each team's work.
Going into this letter of intent spent a lot of time, we've been in conversations with Vale for the last 18 months with regards to this you can read that both companies are motivated with regards to getting the definitive agreement signed.
That's going to take a few months.
Same time, we are doing a baseline study and initiating a baseline study.
I am into baseline study for the basis of our work that we will then be adding too.
The project.
They're off to Mike and the team.
Working with the Vale team will stop.
Willing programs.
We have a clear idea of what we want to do with regards to the drilling that will be supportive of the work that Vale has done in and of themselves.
Valley has been working on this project a long time.
Rules have changed with regards to QA QC and there's a certain portion of the valley database it needs to be updated and that work will also be done hence the reasons, we're taking a conservative approach with regards to discussing the project right now until such time as we can get everything.
The i's dotted and t's crossed with regard to it being compliant with 43 101.
So we will be working on this project over the course of the next 12 months with regards to getting us there.
I can't tell you when the 43 101 will be completed with regards to our resource we have to work with our partner volley determine that what you've seen in the definitive agreement business in 18 months program that will be completed initially to generate a P.
On the project.
And that's what we will be working towards if there's opportunity and we feel along with our partner Vale that theres, an opportunity to put out a 43 101 earlier.
We'll do that but we're going to be doing and working in partnership with Vale and moving this project forward.
Okay. That's very helpful. Thank you.
Yeah.
Our next question comes from Jackie Zawadzki of BMO capital markets. Please go ahead.
Hi, Thanks very much.
A question for you maybe.
On a slightly different subject.
Can you give us an update on the PMA smelter and how much of your material you're selling domestically.
Christians internationally right now.
Thanks Jackie.
With respect to PMA, we did not make any sales during the quarter to PMA.
You may have had some maintenance issues with regards to the smelter and so I've been working through that.
Wanted to come out as you know a CEO here in Brazil has been working with PMA.
And the PMA have been very open with regards to working with with us on potential solutions down the road.
There has been interest.
With regards to various things that it's not our role to get involved in this towards PMA coming back on stream and a stronger healthier position.
And we.
Remained because we are an interested party are sitting.
Sitting on the sidelines and talking to various entities.
There may be an opportunity since up some material to them this quarter, but we're not relying upon it with regards to any of our projections that we will be selling anything to them in the fourth quarter.
Okay No that's helpful.
And with the guidance you gave earlier.
Wanted to see if that was changing at all I appreciate that.
If I could ask.
One other question on I guess, it's really related to the startup of <unk>, but just in general for the company.
As we think took them on moving into production can you talk a little bit about your working capital needs and how.
How that may add to the amount of <unk>.
Inventory and just sort of working capital that the company is going to need in general next year.
Yeah, Jack Great question. So you know both myself and Wayne have had this discussion on numerous time over the past several months.
Have a in terms of working capital draw for for first production to come on in sales. We have a number of levers that we're experiencing are that we're exploring to absorb that working capital intact. So we don't we don't anticipate.
Huge change with respect to working capital drawdown, given some of the levers that we're exploring at this stage.
Thanks, a lot Michael.
Yeah, I mean, its way in here obviously.
We've had initial indications on the.
The concentrate coming out it took them areas pretty desirable spec.
In advanced discussions with.
Various offtake.
Take us too.
Do you enter into first you know first year contracts around that and obviously theres opportunity in those two to manage our I wouldnt capital need.
Sorry, I didn't mean to cut you off thank thank you very much.
Michael and David Thanks for your answers.
Once again, if you have a question. Please press Star then one on your telephone Keypad. Please press Star then one now.
The next question comes from Gordon Lawson with paradigm capital. Please go ahead.
Hey, Good morning. My first question was just for one.
Rollover here can you clarify the key components of a preclinical project.
Timing and got the mill wrapping up at $4 two.
In 2024, but what does.
When does the second shop.
Yeah. Good question Gordon So yeah, that's you're spot on on the mill expansion, obviously, we're completing the installation and commissioning a phasing in Q4.
As we outlined in our NDA news release today.
Shock.
Handover of operations are obviously involved.
As I like to say, we're 44 40 meter is complete on the precinct and about 1460 meters to go on the shaft. So.
That progress we'll start here at the end of the year or in parallel with our underground infrastructure. We're forecasting an on time delivery of the shaft project in Q4 of 2026 there'll be fully operational in 2027.
Okay.
Do you have an idea of what that would do to the mining rate.
The overall mining rate from the pillar mine will be 3 million tonnes. That's the objective.
Okay. Okay. Thank you very much.
<unk> pointed out.
Terminology comes from.
Great. Thanks, a lot.
Okay.
This concludes the question and answer session I would like to turn the conference back over to David Strang for any closing remarks.
Thank you operator, and thank you again, everybody for coming on the call are.
Really appreciate the questions that we have that.
We received.
And we look forward to talking to you at.
I guess, it's going to be in February with respect to the next call on the annual results hopefully we get to see a lot of you.
And between that and continue to have discussions were always available to answer anybody's questions with regards to how operations are going and again I just need to thank the team.
Our overall team for the great work they continue to do.
In terms of delivering.
Uh huh.
Both operationally and on a project spaces.
And getting to the goals that we're looking to achieve.
Thanks to everybody and thanks again to everybody on the call. Thank you operator.
Thank you Mr.
Concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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